Bitcoin rebels risk ‘currency trading chaos’

A split in the Bitcoin community is set to create a new incompatible version of the cryptocurrency on Tuesday.

A group of insiders is unhappy with existing plans to speed up transaction times.

They plan to offer existing investors a matching amount of a new virtual asset – called Bitcoin Cash – which could put pressure on the value of original bitcoins.

One expert has warned there could be trading “chaos” over the coming days.

Several popular Bitcoin platforms are refusing to support the new coins.

That means investors who currently rely on some Bitcoin currency exchanges and virtual wallets will be unable to take advantage of the offer unless they switch to alternative providers. And moving from one platform to another carries risks of its own.

“Nobody can be sure how this is going to play out over the short term,” commented Iqbal Gandham, UK managing director of the eToro trading platform.

Compromise plan

The breakaway plan was revealed just over a week ago after it emerged that a compromise scheme to reform Bitcoin appeared to have gathered enough support to be adopted.

The middle-ground solution – known as Segwit2x – is an attempt to address one of Bitcoin’s constraints: at present the ledger of past transactions, known as the blockchain, can have only one megabyte of data added to it every 10 minutes.

The limitation was originally introduce to protect Bitcoin from cyber-attacks, but has meant some users have had to wait days for their transactions to complete at busy times.

Two conflicting solutions were initially proposed:

to increase the size of each block of the blockchain to more than one megabyte, which would allow more transactions to be processed in each batch

to relocate some of the information from the blockchain to a separate file, which would be transmitted alongside it

Many “miners” – dedicated businesses and others that contribute computer processing power to authorise transactions in return for the chance of being awarded newly minted Bitcoins – favoured the former plan.